Dutch Budget Day 2020

On Dutch Budget Day 2020, the Minister of Finance announced the fiscal measures for the coming year. These new fiscal measures will have a significant impact on the Dutch real estate sector. In this article we provide an overview of the most important tax measures for the Dutch real estate sector.

Introduction of new RETT rates

As of 1 January 2021, the real estate transfer tax (RETT) rate will be increased from 6% to 8%. In addition to this, a RETT exemption has been introduced to improve the position of young starters on the housing market. As of 2021, an exemption will be introduced for starters on the housing market. This exemption ends on 31 December 2025. The exemptions contain three conditions:

i. The purchaser must be younger than 35;

ii. The purchaser must not have used the exemption before; and

iii. The purchaser must use the property as their principal place of residence.

At the moment of acquisition of the property, the purchaser will also need to give a written statement, in which the purchaser declares to use the property as their principal place of residence. If at a later stage this is not the case, the Dutch tax authorities can impose an additional assessment.

The 2% rate applies to the acquisition of residential property by natural persons – who are not defined as starters – who will use the property as their principal place of residence.

All other acquisitions of residential property will be taxed at a rate of 8% starting 1 January 2021. For example this also applies to buyers of a second home, a vacation home and parents buying a home for their children.

These measures have been introduced to strengthen the position of starters compared to investors.

To summarize, the following RETT rates will apply as of 2021:

• 0% for starters;
• 2% for the purchase of homes used as the principal place of residence; and
• 8% for the purchase of all other real estate (non-residential properties and/or investment properties).

Lowering of the corporate income tax rate

As of 2021, the amount of taxable profit that falls under the low corporate income tax (CIT) rate will be increased from EUR200,000 to EUR245,000 and as of 2022 up to EUR395,000. In addition, this lower rate will be further reduced from 16.5% to 15%. It could be lucrative for businesses to use multiple group companies or to terminate a fiscal unity to take advantage of the lower rate. For profits above EUR245,000, the current CIT rate of 25% will continue to apply. The previously proposed reduction in the CIT rate from 25% to 21.7% will no longer be implemented.

Increase in tax rate Box 2

As of 1 January 2021, the tax rate in Box 2 will be increased from 26.25% to 26.9%.

Increase tax-free threshold and tax rate Box 3

As of 1 January 2021, the tax-free threshold of Box 3 will be increased to EUR50,000. And the tax rate will be increased from 30% to 31%. Furthermore, it is still being investigated how the taxation system for the fixed return in Box 3 can be efficiently amended.

Introduction of Job-related Investment Discount (BIK)

Due to the economic effects caused by COVID-19, a so-called Job-related Investment Discount (BIK) will be introduced to stimulate employment. Companies with business investments that generate employment will receive discounts on payroll tax under the BIK scheme. This is a favorable scheme for the construction and real estate sector as it will reduce the costs of projects. This entails a crisis-related measure and is thus as of now still temporary.

Adjustment of liquidation loss scheme

The liquidation loss regime in corporate income tax will be amended. The liquidation loss regime allows taxpayers to deduct a liquidation loss on a participation from the taxable profit. The liquidation loss scheme is limited to participations in which 50 percent of the nominal paid up capital is held and which are located within the EU/EEA. In addition, the liquidation must be completed within three years after the discontinuation of activities. The tightening does not apply to liquidation losses up to and including EUR5,000,000.

Introduction of a conditional withholding tax

As of January 1, 2021, the Netherlands will levy a withholding tax on interest and royalties paid to associated enterprises that are resident for tax purposes in a so-called low-tax jurisdiction or non-cooperative jurisdiction and in certain abusive situations (jurisdictions included on the “Dutch list”). The following jurisdictions are currently (for financial year 2020) included on the Dutch list of low-tax jurisdictions and non-cooperative jurisdictions:

To analyze the impact of this measure, it is recommended to verify whether group companies are established in any of the abovementioned countries. Furthermore, it is important to continuously monitor this list, as it is reviewed annually.

Adjustment of landlord levy

The landlord levy, a tax applicable to landlords of more than 50 homes under the social rent threshold, will be structurally reduced with a total of EUR138 million. This will be achieved through a reduction of the tax rate of the landlord levy with 0,036%.

Changes to energy taxes

CO2 levy for industrial companies

A CO2 levy will be introduced for industrial companies, in line with the implementation of the Climate Agreement in order to cut greenhouse gas emissions. This levy is intended to tax CO2 emissions from industrial production and waste incineration.

Energy tax

As of 2023 the netting scheme for tax purposes will be phased out. In addition, a separate subsidy scheme will be established for cooperatives which enable local residents to participate more easily in sustainable energy projects in their immediate vicinity.